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Strong Buy
Article from Carrie Ghosehttp://www.bizjournals.com/columbus/news/2016/12/07/cardinal-health-more-than-doubled-cash-offer-for.html?ana=twt Cardinal Health more than doubled cash offer for Lymphoseek rights during negotiations with Navidea Dec 7, 2016, 2:37pm EST Industries & Tags Health Care, Pharmaceuticals Share Order Reprints Save Article Get Columbus Newsletters and Alerts Morning Edition >> Afternoon Edition >> Breaking News Enter your email address Carrie Ghose Staff reporter Columbus Business First Related Content Navidea, Cardinal boards approve $80M deal for Lymphoseek rights Inside the battle for Navidea – investors holding out hope Cardinal Health Inc. more than doubled its guaranteed cash offer for Lymphoseek rights during this summer's negotiations with Navidea Biopharmaceuticals Inc., even as the biotech company was fighting for its survival with a creditor in court. Cardinal in June had offered $45 million cash for the North American rights to the radioactive cancer diagnostic aid, with any future payments contingent on drug sales, according to a proxy statement Navidea filed this week seeking shareholder approval of the sale. Navidea hopes to end years of turmoil by selling North American rights to its drug Lymphoseek to Cardinal Health. Enlarge Navidea hopes to end years of turmoil by selling North American rights to its drug… more John Lauer The asset purchase agreement that the Dublin-based companies' boards ended up signing just before Thanksgiving calls for $80 million in cash up front, plus $20 million in guaranteed payments over three years. Up to $230 million in further payments are contingent on Lymphoseek's market performance. Navidea (NYSEMKT:NAVB) expects the deal to close about Jan. 10. A special shareholder meeting is scheduled for Jan. 6, the company told me. Cardinal (NYSE:CAH) declined to comment. Navidea COO Jed Latkin said via email the negotiations were "back and forth," without commenting further. If shareholders reject the sale or it otherwise falls through, Navidea will be harmed and "would not likely be able to continue as a going concern," it said in the proxy. It needs the cash to pay off $55 million to Houston-based lender CRG, which has been claiming default on a 2015 loan agreement since spring. Navidea on Monday asked a Texas court to delay a hearing set for next week, arguing a loan payoff would render the lawsuit moot. The proxy statement reveals that Navidea had first sought royalty-based financing from Cardinal to pay off CRG, and three weeks later proposed selling the rights. Cardinal has been Lymphoseek's exclusive distributor since it launched in the U.S. in 2013, with 50-50 revenue sharing. Gross sales of $13.4 million in the third quarter this year were more than double the same period in 2015. Navidea made a counter-offer to the $45 million proposal that "reflected different assumptions" including the effects of a greater sales effort. It also hired investment banking adviser Evercore/ISI to calculate a fair value, but "the parties remained far apart." Negotiations became more urgent in July as rulings in the Harris County, Texas, court started going against Navidea. In late August came three consecutive days of rapid developments: The parties verbally agreed to the higher purchase price, then a court order allowed CRG to seize Navidea's bank accounts, then Cardinal submitted a non-binding letter of intent, which the two companies signed on Labor Day. Nearly three months of due diligence followed before the more definitive purchase agreement. Here's how the proxy said Navidea would use the $80 million: $55 million in principal, interest and fees to CRG. $9.5 million to pay off a line of credit from its largest investor – a fund owned Platinum Partners, a New York City hedge fund that filed for bankruptcy protection in October. $600,000 in transaction costs. That leaves it with $15 million cash, no debt and an end to litigation costs. It would then seek to launch Lymphoseek sales in Europe and other continents and develop new drugs. Cardinal also would get warrants to buy $15 million in stock that if exercised would make it Navidea's second-largest shareholder. The proxy also asks shareholders to vote on a stock incentive plan for CEO Michael Goldberg, hired in September after years as an investor. |
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